OPEC to Meet in Attempt to Halt Oil-Price Decline

OPEC members will meet later this month in a bid to halt the tumble in crude prices, amid signs that a global economic slowdown is punishing near-term demand for oil. The news of the meeting, which analysts expect will result in another production cut, came as oil prices hit a 22-month low amid fresh evidence that the world's industrialized economies are in recession and consumers and industries are cutting back on fuel spending.
The Paris-based International Energy Agency on Thursday slashed its forecasts for global oil demand, saying it will grow by just 0.1% this year. That is down from last month's projection of 0.5% growth and far below the 1.1% growth rate of 2007. Many analysts think global oil demand will actually contract this year, for the first time since 1983. On Thursday on the New York Mercantile Exchange, U.S. benchmark crude closed up $2.08, or 3.7%, at $58.24 a barrel on market expectations that OPEC will cut output again.

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Low Oil Prices, Credit Woes Could Spell Trouble for UK North Sea

The combination of falling oil prices and the credit crunch spells trouble for oil and gas production in the U.K. North Sea, said senior industry figures.
The U.K. has been counting on steadily rising oil prices to make new projects in the heavily depleted basin profitable and is depending on a legion of small independent oil and gas companies to develop many of the remaining fields as major companies focus their efforts elsewhere.
However, the price of North Sea benchmark Brent crude has fallen by more than half since July to $56.24 a barrel Thursday and the profitability of many new fields is looking doubtful. At the same time, many of the smaller companies that could have developed them are struggling to keep their heads above water.

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Financial Crisis May ‘Postpone’ Energy Projects

The ripple effect of the global financial crisis could force a review of several key projects in the country, including the electricity generation programme, according to a senior minerals and energy department official.

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Gold rush

"Beijing's reserves could easily go up to 3,000 to 4,000 tonnes..."

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

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German unemployment hits 16-year low

The unemployment rate fell in October to 7.2 percent from 7.4 percent in September, with 26,000 fewer people registered as seeking work in the biggest European economy. A total of 2,997,000 people were listed on unemployment rolls the agency said.UniCredit economist Alexander Koch noted that it was the 41st decrease in the past 43 months, and took unemployment to its lowest level since November 1992. But "the lagging indicator labour market is coming more and more under pressure from the strong economic downward forces," Koch added. "A sizeable cyclical decline in employment lies ahead in the course of the next year."Other economists agreed Germany's labour market remained surprisingly robust in the face of the economic downturn, but it wasn't likely to stay that way.

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U.S. Two-Year Notes Gain Most Since February on Slowdown, Fed

Treasury two-year notes had the biggest monthly gain since February after the Federal Reserve cut interest rates twice to spur a contracting economy and stocks tumbled amid a deepening credit crisis.
Two-year securities returned 1.1 percent in October, according to Merrill Lynch & Co.'s Treasury Master Index, for their fifth straight monthly advance. Three-month bills yesterday had the biggest weekly gain since September. This month's decline in U.S. stocks, the steepest in two decades, drove investors to the relative safety of short-term securities, the so-called front end of the Treasury market.

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China Manufacturing Contracts as Crisis Trims Exports

China's manufacturing contracted as the worst financial crisis since the Great Depression eroded export demand.
The Purchasing Managers' Index fell to a seasonally adjusted 44.6 last month from 51.2 in September, the China Federation of Logistics and Purchasing said today in an e-mailed statement. That was the lowest since the gauge was launched in July 2005. A reading below 50 reflects a contraction, above 50 an expansion.
China's cabinet has pledged extra infrastructure spending to stimulate the world's fourth-biggest economy amid the global slowdown. The government has already lowered rates three times in the past two months, increased export rebates and cut property transaction taxes.
``The government needs effective stimulus measures to spur growth,'' said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. ``The external economic outlook is worsening rapidly.''
Manufacturing contracted in July for the first time since the survey began in 2005. It also shrank in August. The October index was a record low.

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Dollar Falls on Bets for 75 Basis Point Fed Interest Rate Cut

The dollar fell for a second day against the euro on bets the Federal Reserve will lower interest rates by as much as three quarters of a percentage point today.
The U.S. currency also declined against the yen and the British pound on speculation the central bank will continue lowering borrowing costs as rising unemployment and sliding home values cause the world's largest economy to contract. U.S. consumer confidence slumped to a record low this month as stocks plunged and banks shut off credit, a report showed yesterday.

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Russia, China sign landmark oil pipeline deal

Russia and China on Tuesday signed a long-awaited deal to build an oil pipeline from Siberia to China after talks between Prime Minister Wen Jiabao and Russian counterpart Vladimir Putin.
The leaders watched as Chinese state energy major CNPC and Russian state pipeline monopoly Transneft signed the deal to build the pipeline from the Siberian town of Skovorodino to the Chinese border.
The pipeline agreed on Tuesday would have a capacity of 15 million tons of oil per year and would be a branch of the main East Siberia-Pacific Ocean trunk pipeline, which is still under construction, officials said.
"We should deepen cooperation in the energy sphere. Long-term cooperation will help economic development and stability on world markets," Wen said at the opening of a Russia-China business conference with Putin in Moscow.
Even after lengthy negotiations on energy ties between the two neighbours, Russia is still only the fifth-largest exporter of crude oil to energy-hungry China, despite being the world's number two producer after Saudi Arabia.
Amid lower energy prices, analysts say China is now seizing its chance.

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Credit Spreads: Overnight Libor 1.23%, -0.03; 3-mo Libor 3.47%, -0.03; TED Spread 2.62%, -0.13; 3-mo Libor/OIS 2.59%, -0.03

Borrowing rates showed some more signs of loosening up as central banks continue to pump liquidity in the markets. The Overnight Libor rate dropped 3 bps to 1.23%, falling for the second straight day after seeing a brief relapse. The rate is 27 bps below the Fed Fund target of 1.50% but most analysts are expecting the fed to drop that rate to 1.00% following the FOMC meeting on Wednesday. The 3-month Libor slid down 3 bps to 3.47%, it slowest level since September 22nd. The TED Spread is down 13 bps and is currently running at 2.62%. This rate has fluctuated in the 2.54% to 2.77% range over the past week. The 3-month Libor /OIS Spread dropped 3 bps to 2.59%. its lowest level since October 1st and down over a full basis point from th October 10th highs. The Euribor also continued its downward trend. Overnight Euribor is down 3 bps and is now at its lowest level since September 10th 2007 as the ECB and Eurozone governments continue to aggressively inject liquidity into their markets. The 3-month Euribor dropped 5 bps to 4.85%, its lowest level since April 28th. The 3-month Hibor jumped 10 bps to 3.84%, up 70 bps from October 22nd. Signs of a global slowdown are causing concerns that the Asian economy will see growth recede from recent levels. Asian banks are starting to move aggressively to provide liquidity and confidence but the rise in the 3-month Hibor suggests they will need to move faster to head off fears. The Japanese Tibor remains an area of calmness as it drops another basis point to 0.99%. It still remains elevated for the month of October but concerns are limited in this region.

Regulator eyes break for insurers - Globe and Mail

Globe and Mail reports Canadian regulators are considering giving insurers some breathing room because plunging stock markets are putting pressure on their capital levels. The Office of the Superintendent of Financial Institutions, which watches over Canadian banks and insurers, is reviewing the capital rules that apply to insurers' segregated funds business. That business sells investment products that act like a personal pension plan, where the insurer invests the client's money into a number of funds and offers guaranteed payouts down the road. (Stocks mentioned: SLF, MFC)

Yen Falls Against Dollar, Euro as Bank of Japan May Intervene

The yen fell amid speculation Japan's central bank will sell its own currency for the first time since March 2004.
The Group of Seven industrial nations expressed concern in an unscheduled statement yesterday about the yen's ``excessive volatility'' after a request from Japan, Finance Minister Shoichi Nakagawa said on the same day, adding that his government was ready to act if needed. The currency had earlier traded near the strongest versus the euro since May 2002 and close to a 13-year high against the dollar.
``There are fears of possible intervention by the Japanese authorities, so the yen is being sold,'' said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's second-largest bank by market value.

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GM stops 401(k) payments

In yet another sign of its financial trouble, General Motors Corp. will halt matching payments to all employees’ 401(k) savings plans.
The temporary suspension, which would affect all 1,340 employees at GM’s engine plant in the Town of Tonawanda and the automaker’s entire U.S. workforce, would take effect Nov. 1.
The action, which a spokeswoman said is aimed at conserving cash, comes in the face of continued declining auto sales.
The Detroit manufacturer (NYSE: GM) also is said to be preparing for new involuntary cuts in its salaried workforce, which totals about 230 at Tonawanda, although a corporate spokesman did not confirm a report which was carried Oct. 23 by some news media.
“GM, like most corporations, continues to align its resources with its business needs to create a more competitive company for the long term,” the company said in a prepared statement.
“We remain focused on building sustainable success, not only on short-term results (and) we will continue to assess our overall staffing needs. Any decisions or actions will be shared directly with employees,” it said.

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More weak data, hedge-fund selling seen this week

In a typical recession, stocks start recovering about six months before the economy does. The crisis we're in right now, however, is anything but typical: Lending is frozen, hedge-fund selling is happening on a massive scale, and economic troubles have spread all over the globe.
As a result, it's possible the economy will need to show signs of strength before the stock market stabilizes and regains steam. So with readings getting darker by the day, expect more of the same this week: extreme volatility.
"Volatility's here, and it's here to stay," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. Last Friday, the Dow Jones industrial average finished down 312 points, "and it seemed like a victory."

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Yen Rises as Carry Trades Pared on Global Recession Concern

The yen rose against the dollar and was approaching a 13-year high as the risk of a global recession and an extended slump in the world's stock markets prompted investors to slash carry trades.
The yen also advanced against the Australian and New Zealand dollars, two favorites of so-called carry trades, in which investors fund purchases of higher-yielding assets with Japanese currency. Gains in the yen may be limited after the Reserve Bank of Australia said it bought Australian dollars on Oct. 24 after the currency fell 22 percent this month.

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Suncor's reduced budget better aligned with future cash flow

The decision on Thursday by Suncor Energy Inc. to reduce its 2009 capital budget and delay the Voyageur expansion project by a year is being given the once over from analysts on Friday.
"Given the current market conditions, Suncor's decision to moderate the pace of development was not a surprise," said Raymond James analyst Justin Bouchard in a note to clients.
"The current capital budget now represents an amount that is better matched with our expectation of next year's cash flow and is about two thirds of what had previously been expected. We have not yet modified our net asset value to reflect the delays, but our initial calculations suggest that the change is marginal at best."
Mr. Bouchard maintained his "strong buy" rating and $65 price target, adding those investors who buy Suncor as a long-term investment will be "handsomely rewarded" over time.
RBC Capital analyst Gordon Gee told his clients that Suncor's announced $6-billion capex budget can be funded – based on US$80 per barrel oil – by his estimated 2009 cash flow for the company of $6-billion.

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German finance minister predicts crisis to last until end 2009

The financial crisis will last at least until late 2009 and it will take years for Germany to determine any costs of its rescue plan, its finance minister said in a interview to be published Sunday.
"The risk of collapse is far from over. It would be wrong to lift the alarm," Finance Minister Peer Steinbrueck said, offering a grim assessment of the country's financial health to the Bild am Sonntag weekly.
The 480-billion-euro (610-billion-dollar) rescue package for banks approved last week is to last through next year, "and we will certainly need it for that duration," he predicted.
"We won't know whether the rescue plan will entail real costs until between 2010 and 2013," he added.
German banks have so far been reluctant to ask for state aid under the rescue plan, with one analyst suggesting they are wary of losing autonomy and of being stigmatised by their peers.
Steinbrueck also backed off from the government's previous goal to balance the federal budget by 2011, a repositioning he adopted recently along with German Chancellor Angela Merkel.

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Asia, Europe reach consensus on financial crisis

Asian and European leaders said Saturday they have reached a broad consensus on ways to deal with the global financial meltdown and will present their views at a crisis summit next month in Washington.
Speaking at the close of a two-day Asia-Europe Meeting in China's capital, the leaders called for new rules for guiding the global economy and a leading role for the International Monetary Fund in aiding crisis-stricken countries.
The biennial forum, known as ASEM, generally does not make decisions, and a statement issued by the leaders indicated how much the crisis in global markets has driven world opinion and institutions.
"I'm pleased to confirm a shared determination and commitment of Europe and Asia to work together," EU Commission President Jose Barroso said at a closing news conference.
He said participants would use the statement as the basis of their approach at the Nov. 15 Washington summit of the 20 largest economies.
Although short on details, the statement, adopted Friday, calls on the IMF and similar institutions to help stabilize struggling banks and shore up flagging share prices.

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Bank of America Offers Bonuses to Merrill's Brokers

Bank of America Corp. is offering Merrill Lynch & Co. brokers in the U.S. bonuses of as much as 100 percent of the annual revenue they bring in, to keep them from defecting after the firms merge, people briefed on the plan said.
Brokers who generate at least $1 million of fees and commissions are eligible to receive the full amount over seven years, according to the people, who declined to be identified because the incentives haven't been disclosed. The Charlotte, North Carolina-based bank is offering smaller bonuses to Merrill brokers who produce at least $500,000 and rolling out a separate retention program for its own brokerage force.

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Follow up on earlier headline on Treasury considering taking stakes in insurances cos -

WSJ reports the Treasury Department is considering taking equity stakes in insurance companies, a sign of how the government's $700 billion program has become a potential piggybank for a range of troubled industries. The availability of government cash is drawing requests from all corners, with insurance firms, automakers, state governments and transit agencies lobbying for a piece of Treasury's pie. While Treasury intended for the program to apply broadly, the growing requests could rapidly deplete the $700 billion, an amount that initially stunned many as being quite large. Among those expected to benefit from Treasury's program are insurance firms. Most insurance companies are financially sound but have seen their long-term investments and stock prices hurt by the recent market turmoil. Treasury wants insurance companies to participate in its program, dubbed TARP, and is considering taking equity stakes in certain firms, according to people familiar with the matter. For now, however, only certain insurance firms would be eligible for a capital infusion. Under the terms of Treasury's program, insurers would have to have a financial institution holding company that was regulated at the federal level. Insurers would also be able to sell its bad assets to the government under a separate element of the program.

Treasury is considering taking stakes in insurance companies, signaling expansion of so-called TARP rescue plan - WSJ

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Treasury is considering taking stakes in insurance companies, signaling expansion of so-called TARP rescue plan - WSJ

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Treasury investing in regional banks

Washington Post reports the Treasury Department plans to announce as early as this afternoon that as many as 22 regional banks -- including Capital One (COF) and PNC (PNC) -- have accepted billions in capital injections from the government that are designed to spur lending and to drive consolidation in the banking industry, according to industry sources. Separately, Treasury is working on ways to get some of the $700 billion in rescue money granted to it by Congress to insurance companies that are a critical backstop to a wide range of deals, bond issues and leasing arrangements, an industry source said. Concerns about insurers grew this week when Metro and other transit agencies faced demands to pay billions of dollars to their banks as years-old financing deals unraveled. The deals were guaranteed by insurer American International Group, which was taken over by the government last month after it nearly collapsed, and now officials are concerned that other insurers, which report financial results next week, are facing similar problems. Other banks receiving government money include Regions Bancorp (RF), KeyBank (KEY) and possibly BB&T (BBT), which has a major presence in the Washington area, sources said, speaking on condition of anonymity because the announcement has not been made public. PNC already announced this morning that it would use the Treasury funds to help it buy struggling Midwest bank National City (NCC).

Follow-up on news that the U.S. is to announce about 20 banks receiving capital; announcement to be released as soon as today

According to Reuters, the U.S. government is expected to shortly announce a list of about 20 banks in the next round of companies receiving capital injections under a $700 billion rescue package, according to a source familiar with the U.S. Treasury Department's thinking. The Treasury in recent days has detailed a plan to directly inject $250 billion of capital into U.S. banks in exchange for preferred shares. Nine of the largest U.S. banks were essentially arm-twisted last week into signing on for the first $125 billion in capital infusions. Neel Kashkari, Treasury's interim manager for the rescue program, told lawmakers on Thursday that more banks are expected to receive capital infusions within a few weeks, meaning that Treasury is expected to announce those banks in the coming days. The announcement of an additional 20 to 22 banks receiving capital is expected as soon as today, the source said.

U.S. Govt to shortly announce a list of about 20 next banks to receive capital injections, according to source - Reuters

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